Which of the Following Is an Assumption of a Cost-Volume-Profit

question 15

Multiple Choice

Which of the following is an assumption of a cost-volume-profit analysis?

• A)Selling price and costs cannot be accurately identified.
• B)Selling price and costs vary within the relevant range.
• C)Inventory levels can increase or decrease.
• D)Selling price and costs behave in a linear manner.

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Definitions:

Flotation Costs

Those costs occurring when a company issues a new security, including fees to an investment banker and legal fees.

New Common Shares

Issuance of additional shares of a company's stock, which can dilute existing shareholders' equity but raise new capital for the company.

Flotation Cost

The total costs that a company faces when it issues new securities, including underwriting fees, legal fees, and registration fees.

Retained Earnings

Cumulative net earnings not distributed as dividends to shareholders, but instead reinvested in the business.